[PRCo] First Harmony Car Enters Pittsburg

[Dwight Long]

Fred

Obviously the promoters of the Harmony Route were not futurists.  They were in good company in the industry.

That said, I think your comparing home mortgages to railway bond financing is not apt.  It would be very rare in my experience to find railway bonds with sinking funds, any more than there were sinking funds to buy back stock certificates.  Bonds or stocks—just another way of raising money for capital investments, the major difference being the amount of risk involved.  In the case of interurban railways, often in the end there turned out to be very little difference in risk—both classes of investors lost all or virtually all.

Bonds were normally meant to be refinanced at their expiry.  In the case of steam railways, at least profitable ones, this is what was done, sometimes at higher interest rates and sometimes at lower.  But in the case of interurbans, as you rightly stated, because of lack of earnings (and the Great Depression) there was no potential for refinancing.

Dwight

From: Fred Schneider 
Sent: Friday, 08 November, 2013 16:04
To: Western PA Trolley discussion 
Subject: Re: [PRCo] First Harmony Car Enters Pittsburg
The scary thing is that they were set up to haul a maximum of 52 passengers per hour and we know they didn't even accomplish that.

What would they have had to have charged each rider in order to amortize all the fixed and variable costs?    My guess is somewhere in the 4 to 8 dollar range back in 1908 and they were probably charging a few cents a zone because that was what they could get.   

Rather than have mortgages like you and I do on our houses where you pay back part of the principle and interest every month, the interurbans deferred the principal until one huge balloon payment at the end.   They simply paid interest for 25 years (or whatever the term of years), and then had to come up with the principle and interest at the end.   They bargained on cheaper dollars thanks to inflation.   But when the time came … usually about 25 years later …. we were in the Great Depression and almost none of them had the money because they had never established adequate sinking funds to pay off the mortgage bonds and the fares were probably never high enough for the inadequate riding.   They also could no longer sell refinancing bonds because the public was not buying streetcar bonds to help broke interurbans in the 1930s.

So if we begin building the Harmony in 1906 and open in 1908 and then 25 years later the bonds are due (I'm speculating that was the cause because it was in so many similar cases), we get to 1931 and we are in bankruptcy.  

Of course it sure didn't help that all the major highways had been paved between 1920 and 1930 and we now had over 1.5 million cars and light trucks on the state highways.   

Glad my grandparents didn't invest in those bonds for their retirement.



On Nov 7, 2013, at 2:54 PM, Bob Rathke wrote:

> Attached is from the Ross Twp. Historical Society - a scan of a newspaper article dated 11/2/1908. 
> 
> 
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